Letter to Carrier Contesting Billing Guidelines, Rate Structure, and Cutting of Independent Counsel's Time

Use note:

This letter is based on California law. Consult your local jurisdiction and adapt accordingly.

Dear Ajax Insurance Company,

We have your two most recent letters.

By failing to even address the point, you apparently concede that there is nothing in the captioned insurance

policy that gives Ajax the unilateral right to impose its billing guidelines on its insured's independent counsel. The only "justification" which you offer for these guidelines is that they purportedly ensure that "unreasonable and excessive activities will not be considered for payment." In fact, as clearly demonstrated by Ajax's substantial cutting of time, Ajax's billing guidelines are nothing short of an encroachment upon the independent relationship between our firm and Ajax's insureds, which is the very essence of the decision in San Diego Navy Federal Credit Union v. Cumis Insurance Society Inc., 162 Cal.App.3d 358 (1984) and California Civil Code §2860.

The Court of Appeal reiterated that:

the purpose of requiring Cumis counsel is to protect an insured's interest. Another court has noted that '[t]he Cumis rule requires complete independence of counsel when an insurance company interposes a reservation of rights which creates a conflict of interest.'

Assurance Co. of America v. Haven, 32 Cal.App.4th 78, 87 (1995), quoting J.C. Penny Casualty Insurance Co. v. M.K., 52 Cal.3d 1009, 1018 (1991) and State Farm Fire & Casualty Co. v. Superior Court, 216 Cal.App.3d 1222, 1226 (1989) (emphasis in original).

Ajax purports to justify its billing guidelines under the pretext that "reasonable fees and costs" are always paid and that unreasonable fees and costs are always disallowed. Yet Ajax's implementation of those "guidelines" reveals that Ajax really seeks to control this firm's representation of its insured.

For example, Ajax's "guidelines" absolutely forbid any attorney from ever discussing any aspect of the case with any other attorney in this office, regardless of whether such conferences are reasonable or necessary. While Ajax has in the past conceded that such conferences are in fact necessary, Ajax simply refuses to pay for them, without any policy-based or legal justification for this position. Ajax has also stated that it will never pay for any attorney to review a document which was ever reviewed by any other attorney in the firm, and under no circumstances may any document ever be reviewed more than once.

Ajax will also, whenever possible, attach the...